I always come here when I need :help…so here goes. I live at the beach and it is a great market for renting vacation properties. I signed a lease for a 1 bedroom across from the beach for $700 all utilities included. In the lease it states I can host guests there without me. I brought in 2 more people to help pay rent on slow season. The property is booking fast and I see a good roi within a couple of months. After all expenses are paid…how do I split profits. I have one person I brought in that has about 45% in it. I have about 40% and the last person lives out of state has 15% in it.
The one with the smallest amount in property does want to come down whenever he wants and stay week-ends and would like to receive a profit. The other 2 people ( including myself) want it strickly for a roi. What is fair? Is there any kind of program showing how much each person has in property and expenses paid out on property. What would you do?? :help Thanks so much!!! We are starting to :argue about what is right. I am sure this can be worked out where everyone is happy :bs :banghead
Btw my thanks to the people that have answered me before and gave me some great advice that has helped me move from Ga to living on the beach by there advice! The seasoned investors are the best!! :beer
Partnerships are like marriages between the rich guy and the gold-digger. Where the rich guy needs a prenup.
Meantime, it seems like everyone wants their cake and eat it, too.
The reality is that the gold-digger partner (15% guy) is consuming his share of the profits by living rent free on the weekends at the beach.
So, the solution seems to be to deduct the profits from gold-digger’s share of the profits by whatever time he spends in the beach property. And this would go for everyone.
How to do this is enormously complicated. You need to sum up the total income for the month, less the expenses, which include any days the partners spend in the property, and then divide the balance by 45%, 40% and 15%. Then you total each partner’s number of days spent at the property, multiply that by the average daily rental rate, and deduct that amount from his share of the profits.
I’m sure I blew the calculations above somewhere, but that’s the best I can offer for free.
Next time, try to “marry” fewer people at a time, and get everything in writing, BEFORE you climb in bed.
Meantime, can’t you and the other major partner each take up a 7.5% slack, and boot the gold-digger partner to the street?
I mean why put up with major crap from a minority partner? Just asking.
:lol Great response! I was hoping you would see this and respond. You have given me advice in the past that was profitable! I needed another seasoned investor opinion to make sure I am on the right path…I am in an area that has so much potential, however I don’t have much income and credit so I just keep climbing slow and working my butt off…wish it was faster…thank-you again!
That’s a great analogy for this if I ever heard one Javipa. So the advice is to avoid adding more partners when ever possible?
Yes, it’s wiser and more profitable to involve as few people in a given deal as possible.
Richer partners generally bite their nails less, and ‘poorer’ partners tend to be in your hair more.
Partnerships are the worst business form but necessary sometimes. Anything with more than 1 head is a monster. The key is define everybody’s responsibilities. Manage expectations is the key.
Easy. Everyone who wants to rent the property does so at current market terms. This includes partners.
Unless you have somehow referenced partner use of the property in the partnership agreement, which I doubt.
You DO have a written partnership agreement? The division of how to divide profits should have been covered in the partnership agreement. If you don’t have one, get one ASAP.
Everybody pays market terms is fair in my eyes too!
Its best to always partner with someone who fronts up the cash and expects a return on their investment. Things always get muddy in my opinion when an invested partner starts using the property for all sorts of crap. Better to get rid of him and pay him off fast as hes sucking up the profit. Explain the scenario to him as a business partner hopefully hell understand.
That is the best advice. Everybody needs to be what they are and when there are hybrids it gets muddy. I had a guy that wanted to loan me some money. He would be the bank,. but then he said he wanted to give me operational advice on the project. That would make him an advisor. With his money in the deal it would make for a difficult situation if he suggested something I said no and his money is at risk. He needed to assess my risk loan me the money and let me operate it. Stay in your lane.